Internal Auditing Report
.
S.no. CONTENTS Pg.#
1. ACKNOWLEDGEMENT
2. INTRODUCTION
3. SWOC Analysis
- Strength
- Weaknesses
- Opportunities
- Challenges
4. Organizational Structure
5. Internal Audit Structure
6. Internal audit Job Responsibility
7. Audit Objective & Planning
8. Audit Program
9. Recommendations
10. Bibliography
Firstly i am very thankful and obliged to GOD Almighty for his blessings and giving us the strength, hope and cool temperament that motivated us to complete the project in a very short and tight period of time. Without his blessings it would have not been possible.
i would also like to express my sincere thankfulness to my course instructor, i.e. Mr. Sohail Sawani for teaching us each and every topic in detail and depth that made us better understand the basics of Internal Auditing, a result of which is this report.
i would also like to thank Mr. Tariq who is an internal auditor in Dubai Islamic Bank for helping me understand that how there organazation do inernal auditor by providing me relevant and informative material for this report
INTRODUCTION
Dubai Islamic Bank Pakistan Limited
Vision statement
To be the leading Islamic Bank providing Shari’a compliant financial services, by creating value for all stakeholders.
Mission statement:
To provide diversified Shari’a compliant financial services and products through the best of innovation, talent and operational excellence while ensuring consistent growth and profitability.
Value
TrustCommunicationInnovationCaringOne Team, One Goal
Dubai Islamic Bank has the unique distinction of being the world’s first Islamic bank, a pioneering institution that has combined the best of traditional Islamic values with the technology and innovation that characterise the best of modern banking.
Dubai Islamic Bank Pakistan Limited
Dubai Islamic Bank Pakistan Limited (DIBPL), commenced operations in 2006. Since then, DIBPL has undertaken major initiatives to expand its branch network across the country. Under its consumer banking division, the bank is offering state-of-the-art Sharia compliant products that effectively compete with those being offered in the market by conventional banks. It also has expertise in providing Retail, Private, Small and Medium Enterprises, Corporate, Investment Banking and Advisory services.
The Bank launched Pakistan's first Islamic Visa Debit Card and introduced financial products covering Home Financing, Auto Financing, and Depository products.
DIBPL has also introduced Priority Banking and Internet Banking, both of which are being recognized as benchmark products in their respective categories. Besides regular banking services, the Bank is committed to bringing foreign investment to the country. DIBPL's corporate wing has actively pursued foreign investors and convinced world renowned giants from the GCC to be part of Pakistan's economy.DIBPL is 100% owned by Dubai Islamic Bank PJSC (Public Joint Stock Company) and its nominated shareholders. The parent company is a listed company in Dubai.
MANAGEMENT TEAM
Junaid Ahmed - CEO
Masood Karim Shaikh - Country Head Corporate Finance & Investment Banking
Zahid Mansoor - Head of Treasury
Tahir Nazir Chaudhary - Head of Risk Management
Dr. Muhammad Qaseem - Head of Sharia’
Irfan Johar - Chief Internal Auditor
Ammar Bin Mujeeb - Head of Information Technology
Wamiq Rizvi - Head of HR & Admin
The world of finance belongs to those who shape it. DIB has taken a leading role in shaping the dramatic transformation that UAE has experienced in the last two decades. Now, with the same vigor, the Bank comes to assist businesses in Pakistan.
DIBPL provides a wide range of services specifically designed to assist Pakistani businesses. You can benefit from our:
Cash Management Services Trade Related Services Investment Banking Services Services for Small and Medium sized Enterprises
Cash Management
DIBPL Cash Management offers comprehensive end-to-end Sharia compliant solutions to meet your cash flow requirements. With our help, you can reduce turn around times for your accounts receivables, better manage your payables, and benefit from our value-adding MIS reports. GL reconciliation would have never been easier for you.
DIBPL offers a range of solutions to help you in your trade transactions. The Banks rapidly expanding local network befittingly complements the extensive experience it has acquired in managing correspondent relationships across the globe. With its team of seasoned professionals, DIBPL has become the Investment Bank of choice for local and regional clients in a short span of time. We leverage our regional expertise and local knowledge to create an efficient blend of solutions for our customers. Driven by Sharia principles, we provide a mix of following services:
Project Finance. Mergers & Acquisitions Advisory. Privatization Advisory. Real Estate Advisory. Balance Sheet Restructuring. Private Placements. Syndications.
Sukkuk Issuance.
DIBPL’s Investment Banking :
it provide its clients with a unique combination of expertise, broad range of investment banking/financial services and access to top regional decision makers. We derive strength from our team that has unrivalled experience in dealing with the largest M&A, Advisory and Fundraising transactions in the country. In the short span of less than one year, the Investment Banking has been instrumental in attracting investment/interests from major groups from the UAE including:
Nakheel. Al- Habtoor Group. Dubai Properties. Limitless.
DIB offers:
Dubai Islamic Business Finance
Dubai Islamic Home Finance
Dubai Islamic Auto Finance
Role of Shariah Board DIBPL strives to bring to its customers, ‘World Class Banking, the Islamic Way’. To ensure that every transaction complies with Islamic Law, we have in place a ‘Fatwa & Sharia Supervision Board’, comprising of scholars of the highest repute, with vast experience in the field of Islamic Jurisprudence, economics and banking.
The ‘Fatwa & Sharia Supervision Board’ ranks above the Board of Directors and is empowered to issue ‘Fatwas’ on any matter proposed before it by the different business units of the Bank. This framework has made DIBPL an organization that practices Islamic finance in true letter and spirit. Important Duties of the Sharia Board
It is the source of expert knowledge on Islamic Principles (Including Fatwas). It oversees the development of all products to ensure no Shariah repugnant
feature arises. It analyses unprecedented situations not covered by fatwa, in the Bank’s
transactions to ensure Sharia compliance. It analyses contracts and agreements concerning the Bank’s transactions to
ensure Sharia compliance.
It ensures the immediate correction of breaches (if any) in compliance to Shariah.
It supervises Sharia training programmes for the Bank’s staff. It prepares an annual report on the Bank’s balance sheet with respect to its
Sharia compliance.
Strengths:
It is the one of first Islamic bank and leading Islamic bank.
According to SBP its a most rapidly growing banking sector.
Dib has strong financial stability and strong capitalization.
It is a most enthusiastic and qualified staff.
Strong operational environment.
Well-built shareholding
Its website satisfies the need of their customer.
Weaknesess:
DIB deduct high charges for most of their services as compared to other banks.
lack of advertisement of their services is one of the weakness.
Exposure to real estate.
As they follow centralized system so system become time consuming.
Opportunities:
Growing Islamic finance market.
As we know that the Islamic banking is growing very strongly so they must grow their operations.
They must explore new area in everywhere in the world and also within the boundaries of the country so they will expand the business.
They must increase their setup of branches in all over Pakistan.
Challenges:
Dubai Islamic bank is facing a strong competition by its major Islamic bank competitors; Meezan Bank and Burj bank. Business of these banks is also growing with very high pace. So in order to achieve the sustainable growth in a market, DIB has to remain vigilant.
DIB should enhance its Branch Network, in order to capture the market of different areas.
Another challenge aced by DIB is low deposits.
While offering a wide range of services provides opportunities, there is also the threat that customers may prefer to go to suppliers who present a more specialised approach.
In case of Islamic banking SBP does not declared any policies that are enforceable bylaw.
All the governmental policies is especially for conventional banks not for the Islamic banks.
Organaizational structure:
Board Of Directors
Head
Of
Audit
Head
Of
Complianc
e
Head
Of
Operations
Head
Of
Treasury
Head
Of
Consumer
Head
Of
Corporat
e
Head
Of
Finance
Hea
d
Of
HR
Risk
Management
division
Head
Of
Information
technology
Analysis of organaizational structure:
The chart shown above shows the organizational structure of Dubai islamic Bank ltd. The Board of directors under whom is theCEO(Chief Executive officer) which forms the second level of this organizational chart. Under the CEO there are different departments which include head of audit, companies, operations, treasury, consumer ,finance, HR,I T, risk management Department. All the departments mentioned above are headed by their respective Group Chiefs who controls their own department and reports to the CEO.The internal auditor will give the detailed report to he head of deparments and wil give the executive summary to the CEO and BOd’s in Dubao Islamic bank.and this structure shows that CEO is directly answerable to board of directors.
INTERNAL AUDIT DEPARTMENT ORGANIZATIONAL STRUTURE
CEO
Internal
audit
division
Job responsibility:
Develop the scope for operational, information technologies, financial and security audit projects and select/develop appropriate audit steps necessary to promote effective audit coverage for the manager’s approval
Conduct management, information technologies, financial and security audit projects according to the yearly audit plans in all areas of the Corporation.
Chief Internal Auditor(CIA)
Head Credit Audit
Head
Operartional
& Departmental
Audit
Mortgage ConsumerFinancing
BranchAudit
ISAudit
Departmental Audit
1st(Lahore)
2nd(Karachi)
3rd
(South)4th
(Sindh)
The primary objective of the Audit and Inspection Group(AIG) is to review the effectiveness of internal controls and risk management practices to minimize business risk.The Audit and Inspections group is expected to performs wide range of audits, which include the following:
• Financial Audit: To assess the reliability of the accounting system and information and of resulting financial reports. This also includes appraisal of the related systems of internal controls.
• Compliance Audit: To assess compliance with the laws, regulations, policies and procedures.
• Management Audit: To assess the quality of management’s approach to risk and control in accordance with the Bank’s objectives. Basically, it concentrates on control problems of high-level management, e.g. evaluation of the organizational structure and financial discipline, long-range plans and objectives, budgeting, profit planning, human and physical facilities etc.
• Information System Audit: To assess the controls over Information Technology systems and their application. This covers the analysis of computer based information systems (including the aspects of Change Management, Disaster Recovery Planning, Integrity of information produced etc.),which is an essential part in the evaluation of the overall system of accounting and internal controls and assessing reliability of the processed data.
AUDIT OBJECTIVES AND PLANNING To uniformly document the audit planning process, an Audit Objectives and Planning Checklist will be completed before each audit begins. The Audit Manager responsible for the audit will be responsible for the timely completion of the checklist. The checklist has been designed to document the following planning information:
A. Reviewing prior audit work papers, prior audit scope and audit reports, and determining specific follow up steps required.
B. Reviewing prior audit time versus findings and conclusions on controls, and determining the impact on the current audit. C. Assessing current audit risk, and identifying current audit concerns. D. Coordinating the audit with outside auditors, and determining the effectof their work on current audit scope. E. Establishing specific audit objectives. F. Estimating the time and resources necessary to meet the audit objectives. G. Developing and approving the detailed audit program. H. Communicating with all who need to know about the audit.I. Documenting the rationale for selecting audit entrance- and exit-levelmanagement to make sure that the management level selected has theauthority to implement the agreed corrective actions. J. Communicating with management of the unit to be audited regarding theaudit objectives, and obtaining their comments and suggestions to facilitatepositive audit results. K. Revising the detailed audit program, if appropriate, to reflect the results of communications with management of the location to be audited, or toreflect the results of the on-site survey. L. Approving the audit work plan and target completion date.
Planning the Detailed Audit
The elements of materiality and relative risk must be considered in performing the audit. The due professional care standards do not imply unlimited responsibility for disclosure of irregularities and other deficiencies. The auditor's principal effort should be in those areas where significant problems or deficiencies may exist, rather than in areas that are relatively unimportant. Time should not be spent examining or developing evidence beyond what is necessary to afford a sound basis for a professional opinion. The results of the survey should be analyzed to determine the need for a detailed audit and the specific areas to be covered. To assist in identifying those vital activities and to help evaluate their relative importance, the following steps can be applied:
• Briefly record each problem indicated during the survey • Record your evaluation of the significance of the problem • Record the potential effect of the problem • Record what is needed and the estimated time required to confirm the extent and
significance of the problem • Rank the problems in the order of importance After these steps have been completed, the detailed audit program should be prepared, allocating the project budget time for fieldwork to the specific areas to be covered in the audit.
AUDIT PROGRAM
The audit program should be prepared after the completion of the preliminary survey. The audit program is a detailed plan for the work to be performed during the audit. A well-constructed program is essential to completing the audit project in an efficient manner. A well-constructed program provides: A systematic plan for each phase of the work that can be communicated to all audit personnel concerned. • A means of self control for the audit staff assigned. • A means by which the audit supervisor/manager can review and compare
performance with approved plans. • Assistance in training inexperienced staff members and acquainting them
with the scope, objectives, and work steps of an audit. • The basis for a summary record of work actually performed. • An aid to supervisor/manager making possible a reduction in the
amount of direct supervisory effort needed.
• Assistance in familiarizing successive audit staff with the nature of work previously carried out. The program consists of specific directions for carrying out the assignment. It should contain a statement of the objectives of the operation being reviewed. For each segment of the audit the program should (1) list the risks that must be covered in that segment; (2) show for each risk the controls that exist or that are needed to protect against the indicated risk; (3) show for each of the listed controls the work steps required to test the effectiveness of those controls, or set forth the recommendations that will be required to install needed controls; and (4) provide space for initials of auditor completing the audit step, reference to the related audit work papers, and brief comments.The audit assignment, usually prepared by the Audit Manager, initiates the start of Internal Audit activity. It is to be completed before any work is done on the audit. The audit Manager assigns the audit name and number, provides direction as to what the audit objectives are and any special concerns or considerations, determines the audit period, and assigns audit personnel and time budget. (as per the audit assignment form.) The estimated time budget is initially obtained from the annual audit plan. Any proposed changes to the budgeted hours based upon preliminary work such as review of prior work papers, discussions with the audit customer, etc., are requested .(through the use of the Budget Revision Form
AUDIT ASSIGNMENT The audit assignment, usually prepared by the Audit Manager, initiates the start of Internal Audit activity. It is to be completed before any work is done on the audit. The audit Manager assigns the audit name and number, provides direction as to what the audit objectives are and any special concerns or considerations, determines the audit period, and assigns audit personnel and time budget. (as per the audit assignment form.)
ILLEGAL AND IMPROPER ACTIVITIES
Organizational policy specifically prohibits certain activities and requires approval of a senior executive before actions may be taken regarding certain other types of transactions. The prohibitions cover: Political Contributions Bribes, Payoffs and Kickbacks Off-Book Accounts - False and Fictitious Entries Exchange Law Violations Customs Law Violations Tax Law Violations
Violations of Any Law Relating to Business Conduct Violations of Any Other Laws Payments of Excessive Fees or Commissions to Consultants, Where the Justification Is Not Documented
FRAUD / IRREGULARITIES / INVESTIGATIONS Auditors will be familiar with the organization’s fraud policy (as appropriate) and be alert to situations involving possible fraud or irregularities. In cooperation with the Legal Department, the following guidelines will be followed if such a situation is encountered. If shortages or irregularities are found, carefully avoid openly accusing anyone. Contact the applicable Audit Manager or the Chief Internal Auditor, and provide the following details: The name(s) of the employee(s) who has/have knowledge of the situation. The approximate amount of the suspected or potential fraud or irregularity. A brief description of the evidence which substantiates the suspected or potential irregularity.
Maintain confidentiality about possible shortages/irregularities/ fraud until the Audit Manager or the Chief Internal Auditor has approved an investigation plan. Internal Audit management will consult with the Legal Department regarding the investigation plan and the appointment of an investigation team.
Recommendations:After analyzing all the information related to Internal Control System of Dubai islamic Bank I have come up with the following recommendations that Dubai islamic Bank can adopt to further improve their performance
The establishment of internal control systems within banks and financialinstitutions is an essential condition for insuring the efficient functioning of thefinancial system.
The Board of the bank shall approve and revise on a periodical basis, once per year at least, appropriate internal control systems, on which depends the functioning of the institution in compliance with the legislation in force, including reporting requirements of the State Bank of Pakistan, as well as internal normative acts. The Board of the bank shall approve internal regulations within all fields of activity of the bank. The Board consider whether aspects of the monitoring process are to be carried out by a sub-committee on behalf of the Board. If so, consideration must begiven to the charter and capabilities of such committees.
The Board should ensure that internal audit is in a position to provide the board with much of the assurance it requires regarding the effectiveness of the system of internal control. It should not only assess the ‘parts’, but also the‘ corporate glue’ holding the parts together. All directors should ensure that they are satisfied that the Board’s statement oninternal control provides meaningful high-level information that enables shareholders to evaluate how the principles of good governance have been applied.
BIBLIOGRAPHY:
Name: Syed Tariq Ahmed
Post: Internal Auditor At Dubai Islamic Bank Pakistan.
Address: 3rd floor Khayban-e-shahbaz branch , dubai Islamic bank, DHA phase 6
Telephone: 021-35348001-7
Extension: 5126
Mobile: 0300-2944092
